Detroit Defends Its Bankruptcy Plan

by San Antonio Attorney

The City of Detroit defended its debt restructuring plan and gave a preview of what they have prepared for a federal court trial this month.

According to the legal team, the city’s plan to exit from bankruptcy protection is fair and reasonable and benefits creditors, who have filed objections on the plan.

The $660.8 million plan to alleviate pension reductions and protect the Detroit Institute of Arts’ collection was also justified by the city. In a court filing, the legal team stated that the city aims to help Detroit’s most exposed creditors and preserve a major cultural asset.

Above all, the plan enables the city to restructure its grinding debt burden while still providing services to its residents, said bankruptcy lawyer Heather Lennox.

U.S. Bankruptcy Judge Steven Rhodes overruled the creditors’ objections and accepted the restructuring plan.

A trial on July 24th was scheduled by Judge Rhodes to determine whether it is viable to reduce $9 billion of the city’s debts through the restructuring plan.

The restructuring plan has been attacked by Syncora Guarantee Inc Bond and Financial Guaranty Insurance Co. insurers arguing that it mainly benefits pensioners and discriminates against bondholders and other unsecured creditors. Moreover, the insurers want to monetize the art collection of the city.

The Detroit Police Officers Association also disagrees to the plan, calling it “illegal and punitive”. They say that it seeks to punish the union for disagreeing to the terms of a new contract with the city.

Pensioners have until July 11 to vote for the restructuring plan so that they will receive the $466 million in private money within the next 20 years and the assured lump-sum payment.

In a separate court filing by Michigan Attorney General Bill Schuette, she explained that any pension shortfalls will not be passed to the taxpayers.

 

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